How To Pitch Your Startup Idea
Less than 580 words
This post is a part of the series “Zebras & Horses” that describes areas for growth in the capital allocation process.
In 2022, I attended a conference called AFROTECH for the first time. I registered for a session on entrepreneurship, and during the session, Ryan Wilson - one of the founders of The Gathering Spot - spoke about his journey building his startup.
At one point during the talk, he focused on his experience fundraising. The goal of this part of the conversation was to share lessons with current and prospective founders. He said something like this. I'm paraphrasing:
I was talking to people about The Gathering Spot to try to get investment, but I wasn't getting traction—no one invested. I came to realize that I had to change my approach. I was describing all of the great things about the business, but people didn't want to hear that. I was describing the business like it was a zebra, saying 'here's all of the ways that we are unique and different'. This was a mistake.
I had to alter my pitch to connect with what the investor was looking for. I had to describe my business differently every time I pitched it. For example, if I was talking to an investor whose investment thesis focused on Real Estate, I would describe all of the Real Estate angles to my business. So, if you're having trouble getting investors, stop describing your business as a zebra. Investors are looking for horses…
Investors are looking for horses. It’s a great analogy. What does it mean?
It means that you need to have empathy before you seek empathy. You need to constantly frame your ideas as a response to someone else’s.1
If founders can understand the phenomenon that Ryan is describing, if they can understand why they should pitch Horses and not Zebras; as well as how, where, and when they should do it, the entire world benefits. And not in some abstract way. GDP increases. Founders and capital allocators benefit tangibly. Both parties save valuable time in their quest to build and contribute to businesses that transform the world.
But even knowing that Horses are welcomed more than Zebras, it’s worth noting that changing the description of your business to get investment is still overly optimistic advice. It suggests a kind of Goldilocks effect is at work in the capital markets. It suggests that if you pitch your business just right every time, every capital allocator will give you resources.
We know this is not the case. As Josh Kopelman - founding partner at First Round Capital - explained on the Masters of Scale podcast:
The job is 99% percent of the time we’re saying “no.”
So why do founders get so many no’s?
I believe that it is usually because of one of the following:
The founder has not built enough trust with investors to show that they can build this business to its potential.
The idea and business model are not ubiquitous.
Even if this list is not exhaustive, it may still be useful for articulating the gap between capital allocators and founds.
In the next post of this series, I will describe how founders can build trust.
It also means there are two ways that founders learn how to describe their businesses to get the resources they need: directly and indirectly.
Directly: Someone can tell them “Make your zebra one color”; or
Indirectly: the market can force it on their consciousness.